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#178: Using a reverse mortgage to pay niece’s education costs


While many of your friends have been helping fund their grandkids’ education, you have no children of your own. Over the years, though, you’ve provided funding for your niece and nephew’s college costs, since your younger brother, a self-employed widower, has not been in a position to be of significant assistance. Your nephew is now quite well situated job-wise, and his company has a program to help repay his student loans. Your niece, meanwhile, is about to enter a nurse practitioner master’s degree program, and you would like to help her with the six-figure costs without putting your own resources at risk.

Now 66 and retired from your full time corporate position, your plan is to continue doing small business consulting “gigs” as long as you are able.  With your home fully paid for and the house and grounds in generally good repair, your only concern is possible future health setbacks. Your monthly pension, combined with modest portfolio income, has allowed you to channel as much as possible of the part time earnings into a SEP-IRA. Your plan had been to defer claiming Social Security payments until age 70, but, if you draw down your accounts to help your niece, you may need to either begin claiming Social Security now and/or eliminating SEP contributions.

Consider tapping your housing wealth rather than changing your well-thought-out retirement income planning. With a reverse mortgage set up as a line of credit, the equity you’ve built up in your home can serve as a source of funds to help your niece pursue her career goals. Since reverse mortgage withdrawals are considered loan proceeds rather than income, the money will not be taxable, and there will be no need to either accelerate Social Security payments or to reduce SEP contributions, thus leaving your taxable income level unchanged.

A reverse mortgage might allow you to be a good uncle without “crying uncle” when it comes to your own well-thought-out retirement income planning.

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: Equal Housing Lender